Happy Budgeting; Reduce Your Expenses

The other day I posted about the importance of creating a budget, especially after a major financial melt down. I organized the methods to do so and included worksheets to help a person get started. The next logical step after forming a budget is to figure out how to reduce some of your expenses and/or increase your income.

Most often when I hear someone complaining about not having enough money, they immediately blame their income for their financial woes. Usually they say something to the effect of, “If only I made X amount more, things would be easier.” But most people can live on their income comfortably, they just need to make some adjustments to their expenses.

Ways to Reduce Your Expenses

The first thing to look at in a budget is your fixed expenses, such as rent or mortgage payments, utilities, insurance, and groceries. Is there any way to reduce those? I’ve listed some strategies below which may or not be effective depending on your current carriers and where you live, but it’s a good place to start:

Land line telephones– Do you still have a land line? Do you need one? If you find you do need a land land for business purposes or your cell phone reception isn’t great, call your phone company and ask them if they have any special rates they can apply to your current plan. I do this a couple of times a year and save about $10 – $20 monthly on my bill.

Utilities (gas/water/electricity) – Minimize your utility bill by reducing your usage, it’s as simple as that. Some people like to use Kill a Watt to figure out how many watts they’re using and then reduce as needed. I currently have a battery back-up connected to my computers and printer and recently found out my laser printer is an energy hog. Now, I keep the printer off until I need to print. You can also drastically reduce your heating and cooling costs by having a pro likeAlbany roofing contractors insulate your roof and attic.

Insurance – Can you increase your deductible comfortably to reduce your premium? If you have a savings account that could cover the deductible, you might save enough money by increasing your deductible on your auto insurance or home owners insurance and save hundreds of dollars annually. I was able to save $150 annually on my auto insurance by increasing my deductible to $1,000 and by switching carriers.

Groceries – Coupons aren’t what they used to be, you don’t need to clip and cut as much as your mom used to. Today, you can print out coupons for items you need. Penny from the Saved Quarter also just wrote a fantastic post over at Money Cone about how to Never Pay Full Price. Also, by just purchasing items when they’re on sale, you can save 10% or more off your grocery bill.

Rent/Mortgage – It never hurts to ask your landlord if they could reduce your rent. If this doesn’t work, you could always begin looking into less expensive areas or cheaper neighborhoods. Another option for both renters and homeowners is to rent out a spare room or an area of your home (however, be aware that subletting is usually not allowed in a rental agreement.) As for mortgage expenses, there are many refinancing options out there. Refinancing isn’t an entirely free option, but it may work for you if you intend on living in your home for a while.

Once you’ve given your “fixed” expense the once over, it’s time to tackle all of the other, more flexible expenses. Flexible expenses can be anything from eating out and everyday habits to cable television and vacations.

Eating Out – This is a category that is easily reduced. Depending on how much money you need to reign in, you can reduce your take-out expenses as easily as just ordering water at a meal (saving anywhere between $3 – $15 or more) to sharing a dinner with your spouse or significant other. This year I’ve limited my budget to a fixed amount which allows me to still enjoy eating out occasionally.

Everyday Habits – Habits can add up quickly, especially if they are highly addictive. Obviously the best advice is to quit a highly addictive habit. But if you just aren’t ready yet, find the cheapest items possible in your neighborhood. Another option is to set a limit. I’ve recently given myself a $50 monthly budget for my Starbucks habit. Once that money runs out, I have to wait until the next month.

Cable Television – Many people say that this is a luxury item and I’d have to agree. But if you must have cable, sign up for a bundled package, which is usually offered at a lower price, or reduce your subscription. Of course if your budget just can’t afford this luxury, then ditch it.

Vacations – Everyone needs some time off and some adventure. Vacations offer this escape, but not at the expense of going into debt. Some alternatives include staying closer to home, reducing the amount of time from a week or more down to a few days or a weekend, camping or choosing a less expensive option, or planning a vacation far enough in advance allowing you to save for that trip.

These are some possible options for living comfortably within a budget. Next, I’ll cover increasing your income to pad your budget.

Have you reduced your expenses this year? Which expenses do you find easiest to reduce?

36 Comments

I love my Kill-A-Watt. I also got an energy saving power strip that I love. It has a ‘master plug’ which is my PC, and when I turn the PC off (and it senses that the power draw is gone), it automatically kills the power to anything else plugged in, so the monitor, speakers, printer, and the like all get turned off without me having to shut them off individually or worse, forget about them.

I have reduced my expenses by bartering and cleaning my son’s dance studio once a month in return for free dance lessons and keeping up the lawn in our apartment in return for a freeze on rent increases. We have also cut out going out to eat.

I will have to try to contact the phone company and see if I can get our rates reduced. Thanks for the tip!

On insurance, try switching. You don’t even have to switch -just the fact that you got a lower quote will force your existing insurer to lower rates. I did exactly that and my rates were cut more than 60%! (I did have to switch for a few days and back to my original insurer though, that was a hassle, but could’ve avoided had I called my current company right away).

Same goes for cable. If you can’t do without cable, call up your cable company. They’ll most likely offer something. (but don’t sign up for *additional* channels for discounted prices! Focus!) 🙂

@MoneyCone – I switched auto insurance carriers last year and saved quite a bit of money since they are the same carrier as my rental insurance. Insurance companies often give discounts if you carry more than one type of insurance policy with them. Thanks for adding that tip.

I cut my cell phone bill in half by cutting down on minutes and removing text messages from my phone. I signed up or Google Voice and I make free calls on my laptop anywhere I have wifi. I use my 450 minute plan for emergencies or when I’m out on the road. I get text messages on google voice and check them using the data plan that comes with my phone. I eventually want to buy a wifi hotspot and make all calls from a handheld wifi enabled device, maybe an iPod touch. I’m working on more ways to save money so I can invest more! Great tips

Reducing living expenses was one of the easiest things i’ve done. I dont have a land line anymore, I watch my heating/cooling expenses and I check my car insurance every 6 months when it comes up. It’s such easy money.

Getting rid of a landline is a great way to save some change. Besides the money, though, it is nice to use only my cell phone and answer only the calls intended for me. Meh…I always hated answering the landline when I knew it was a call for someone else.

Funny you should ask! I am earning more this year, so I am just making small adjustments such as only going to the movies we really want to see. This is an off year so no major trips. Our spending level will stay about the same, but on different things.

@Krantcents – It’s great that you’re earning more than usual. I really hope to increase my income once I get hired (LOL! – inside joke) as a teacher in the next year or so. Once I’m employed, my goal is to stash a huge portion into retirement so that I can actually retire around 60 or so. 😉

Hi Little House, this is a great list! I always tell people to try to cut the biggest expense first, then move down from there. In 2009, we moved into a cheaper place that is in better shape and cheaper to heat/cool as well. I was going to get a smartphone, but I just have a prepaid cell as I don’t use it much. I haven’t heard of Google Voice before, but I do use Skype to videochat with relatives for free. Changing insurance companies can save you hundreds of dollars and you don’t have to give up anything either.

@Jennifer Barry – I’d like to find a town that is less expensive but with a similar climate. That’s been my challenge so far. As for Skype, I’ve used it a couple of times, but haven’t really been hooked by it yet. I need to try it out more.

I always had roommates up until I got married. Sharing living costs makes a HUGE dent in expenses. I highly recommend it if you can find someone decent. I lived with mostly other young professionals from my workplace, so I never got hosed.

@First Gen American – I also lived with roommates until I married. Living on my own just wasn’t going to happen in the city I live in, it was just too expensive. I also liked the idea of living with friends, luckily they were all employed and could pay their share of the bills. 😉

For utilties, I still haven’t combined my internet and phone service, but here’s why:

For internet service, I look for quality, not just price. Yes, I may save with others, but service is much poorer too for what I do. As such, I have the level that I want to have without going overboard on it. That’s with one company. If I was to bundle landline phone with it, it would work out to cost me about $35.00 more per month. Nope, not doing that. With the phone company in the area, it would run me $30.00/month before fees not even counting long distance. Nope, not doing that either. Instead, I use JOI Phones that only cost me $215.00 per year on an after fees basis. Therefore, as you can see, bundling doesn’t always save you money.

As for gas, electric and so on, yes, but you can only cut down so much before you are at bear bones. Even according to our utility company, we are already at a pretty low rate (almost always showing us at the lowest point) relative to other homes of our type.

Insurance: As for car insurance, I get limited liability, especially after what happened one time when I had full coverage, but was treated like it was only limited liability only for my insurance company to have me take the fall even though the police report clearly stated I wasn’t at fault, but yet, the other guy’s insurance company laid the claim I was 50% at fault for hitting a 3rd vehicle involved, which that 3rd vehicle was the vehicle that did a U turn in front of me on a wet misty day, which I barely even tapped the vehicle. My vehicle was the only drivable vehicle as that guy did a pretty bad bang up job to the side of that 3rd vehicle to the point, they had to use the jaws of life to get the lady out of that vehicle. As such, I only get limited liability.

@Ronald R. Dodge – I agree that good service at a higher price beats crummy service at a cheaper one. I’m not very knowledgeable about our cable company and how good their phone service is, but I can’t imagine it would be terrible. I hope to bundle my DSL, cable and phone this month for a whopping $50 savings. Hopefully my service won’t suffer from it.

Other than for auto insurance (most states require you to get this regardless), with all insurances, it’s either get or don’t get, and if you do get, how much. While most people say they “MUST” have insurance, I don’t believe in that statement cause that’s how the insurance will take advantage of such statements and charge outragously high prices, which then for the doctors, they will raise their prices outragously for those that aren’t covered. Therefore, the whole medical field are feeding each other off of what’s so called “A NECESSITY”. While medical stuff is necessary, it’s only necessary to a certain point. Beyond that, it’s overkill. You have to remember, when it comes to insurance, it’s really all about risk management. If you go too far with insurance, you can be paying out your butt that you could be saving with better risk management. If you really think about it, 50% of the financial wealth building is really all about managing risks. Some do better at this than others. I’m not saying to be blind to such risks, but rather to be attentive to as much of all risks factors, and learn how to manage such risks with what you have to work with. The other 50% would be about discipline as far as not spending too much. Therefore, there’s 3 basic ways how you can end up very poor, either take on too much risk and something major happens that ruins you financially, you don’t take on enough risk and you become poor due to paying too much for such risk protection, or you end up splurging majorly and don’t contain your expenses. For me, I compare and I also use statistics taking into account our current set of circumstances to see if taking on such insurance makes sense or not. I don’t look at it like “Oh, it won’t hit our family.” That’s no way to look at it, but rather I look at it, what’s the likelihood of it hitting us, what can we do to minimize such impacts, and what sort of insurance should I take on. I also have to look at it from the financial stand point of view, as money can only go so far. Therefore, I have to decide what insurance to get and what insurance not to get if it comes to that point. There again, it’s about risk management.

Grocery is something that I am constantly having to deal with (just like anyone else). However, as a rule, I found coupon clipping (or online version) to NOT be much of a savings, but rather really costing more as I often find other things without coupons to really cost less than items with the coupons to serve the same purposes. There has been exceptions, but not many. Not only that, but a lot of coupons I found to be of such so little value or for such very small containers, they are really more or less just teasers in attempt to get you to pay for their products. As such, I found doing coupons not worth my time.

However, I do belong to Sam’s Club, which for many things, their stuff does cost less than what I would be paying at grocery store as the items at the regular grocery store in many cases are significantly way higher than at Sam’s Club. Note, not all items are like that, but many are. Of course, I am having to pay for a family of 7, so it does make sense. However, this was even true when I was living all to myself with that $4,000 annual budget in the mid 1990’s.

Rent/Mortgage, not a whole lot you can do other than do what you can to get your mortgage rate down really low (thus one such reason why I have never been able to use the Schedule A, even in my first full year of home ownership). Another idea with regards to those that’s renting now and looking at getting into a home, you may want to look into the Mortgage Credit Certification Program that is administered by each state. One such benefit you get from it, you get to claim either 20% (if you by a home in a targeted area) or 10% (if you buy a home outside of targeted areas) of the interest as a tax credit on the 1040 long form while the rest of the interest goes onto the Schedule A. I found about about this when I was doing a tax review back in April 2003 prior to purchasing a home in 2005, when I did a full blown tax review using the 1040 long form. However, I didn’t get the MCCP cause I didn’t move into a targeted area. The interest rate on for the MCCP loan was higher than the loan that wasn’t part of the MCCP. After taking into account of the net difference seeing what the Effective APR was for both, it made more sense to not get the MCCP loan. If I was to move into a targeted area, it would have made more sense to get the MCCP loan given at that point, the tax difference would have made up enough of a difference for the effective rate differences.

For me, the targeted area would have been to live within the city limits of the city of Cincinnati, and after the various issues I had to deal with having rented within the city, I was like, “Thank you, but no thank you.” I don’t need to have my family living in such places where government just allow the parents to put the kids up to disrespect and destroy other people’s property and then the police claim they can’t do anything about it cause the kids are only minors. The parents within the city in most cases don’t teach their kids to respect other people’s properties, and if you do let the parents know about something their kids did, the parents say they will deal with it, but as far as you can tell, the parents don’t deal with it, but rather allow it to keep happening, such as one time when a 14 year old child threw a pear and it hit my wife, who was pregnant at the time. I confronted the child, and the child denied it all the way, even with me having seen the child doing it. The parent said it was going to deal with the child, but the child kept up with his not so good behavior and kept up with the disrespecting. These are the kinds of reasons why I choose not to by a home within the city limits of Cincinnati. The tax benefit of the MCCP was not worth the hassles that I had to contend with as a renter.

Eating out. We have a point system, and we only eat out once a week. This point system for the kids is the only thing that seemed to have worked. I attempted so many other things including allowances, but none of that stuff worked for them to get on board. As such, I have had to find some other way, and it’s this point system that I instituted. However, what I did, I set it up in a manner where the weekly winner would get to choose where it wouldn’t really be that much more of a cost than what we were already doing.

Daily habits? What daily habits? I have weekly habits, but not daily. My one weekly habit is bowling, which cost me $16 per week. However, that’s not all bad like smoking is cause it is getting a small bit of exercise in. Granted, nothing like cycling, but it’s not like smoking either. On a scale of 0 to 20 with 0 as very bad for you and 20 as very good for you, it would be more like 11. Now if you drink alcohol on such occassions, then not so good, but for me, after one very bad experience I had with alcohol, alcohol has never tasted the same for me. I rarely drink it and if I do, it’s only a very small amount as it’s just not the same anymore. In years past, bowling may have been considered to be more like a 6 cause of all the smoke filled area, but now that the state has banned such smoking in public places, I can breathe freely and not have to contend with such smoke just to do an activity in a league with others. I’m the type I need to have some form of competition to have some sort of stress releasing. Bowling in a league allows for that, but wasn’t very pleasant when it was always smoke filled from so many people smoking. In the past, it was either put up with it, or don’t bowl in leagues. Glad I no longer have to put up with smoke in order to bowl in leagues.

Cable TV? What’s that? I rarely watch TV. As such, I don’t see a point in getting any sort of paid TV service. Not only that, but our budget doesn’t allow for it. It’s already bad enough I am paying for cell phone service ($44.00 per month with unlimited long distance calling as you don’t know how my wife is, thus why the unlimited plan along with unlimited texting and unlimited pictures), my internet service (some of it I consider as necessary with regards to the finances I do, but the rest of it, not so necessary, but more of not being so much on my nerves as I can’t stand slow services or items not working properly cause of not sufficient bandwidth or other system criterias for such things to work properly). However, that only cost me about $48.00 per month.

As a general rule, I won’t get variable plans cause variable plans ends up costing us way more than the fixed plans.

As for vacations, that’s generally spent with other family members, so the only money we spend in general are for transportation by mini van and food. Very little compared to other households. As for when we take such trips, that’s generally towards the end of the year, thus why the months of November and December tend to be low months from a financial stand point of view. However, the other 10 months should more than easily make up for those 2 poor months.

These are great tips! One thing to take into consideration when deciding to raise your deductible — the experience and age of your drivers. When I added my 16 year old onto my policy, we ran the numbers and realized that it would take over four years without any claims for the deductible savings to be realized. Statistically speaking, with a young driver, the odds are against going four years without any sort of claim. (There’s a reason it costs so much to insure them). Hopefully, in four years I will be able to look back and say “Oh! I should have upped the deductible!”, but for now I’ll play the odds.

I think landlines aren’t very useful now because of mobile phones. And eating out? I actually love to eat at home rather than outside. So for a change, I only do it at least once a month! That actually helped me saved a lot.

I rarely drink it and if I do, it’s only a very small amount as it’s just not the same anymore. In years past, bowling may have been considered to be more like a 6 cause of all the smoke filled area.. | 😛

I agree that good service at a higher price beats crummy service at a cheaper one. I’m not very knowledgeable about our cable company and how good their phone service is, but I can’t imagine it would be terrible.

for me i choose to have landlines because not so expensive unlike to mobile phone always buy a load,I actually love to eat at home rather than outside. So for a change, I only do it at least once a month! That actually helped me saved a lot.

This is a great guide.Yes, you are right, most often people complain that they cannot meet all their expenses because of low income, but in fact cutting our unnecessary expenses is needed and left only our fixed expenses which also can be cut down like payments for electricity and water bill. This is an eye opener post to everybody who is always complaining about high cost and not meeting all the needs.

I look for quality, not just price. Yes, I may save with others, but service is much poorer too for what I do. As such, I have the level that I want to have without going overboard on it. That’s with one company. If I was to bundle landlines phone with it, it would work out to cost me about $35.00 more per month.

This is a great guide.Yes, you are right, most often people complain that they cannot meet all their expenses because of low income, but in fact cutting our unnecessary expenses is needed and left only our fixed expenses which also can be cut down like payments for electricity and water bill. | 😛